Overview:
The Japanese Yen (JPY) has managed to recover a major part of its intraday losses but remains on the defensive for the third successive day against the US Dollar (USD). Geopolitical tensions in the Middle East and concerns about a weaker economic recovery in China continue to influence market sentiment, supporting the safe-haven JPY. Meanwhile, the USD faces selling pressure, snapping a four-day winning streak, as investors await more clarity on the Federal Reserve’s (Fed) future policy moves.
Factors Influencing JPY:
Geopolitical Tensions: Concerns about a further escalation of geopolitical tensions in the Middle East contribute to a generally weaker tone in equity markets, supporting the safe-haven appeal of the JPY.
China’s Economic Recovery: Weaker economic recovery prospects in China add to the cautious sentiment, influencing investors to seek refuge in safe-haven assets like the JPY.
BoJ’s Policy Outlook: Anticipation that the Bank of Japan (BoJ) may shift away from its ultra-loose policy settings also provides support to the JPY.
Factors Influencing USD:
Fed Speculation: Speculation about the Federal Reserve’s potential interest rate cuts keeps the USD under some selling pressure, interrupting its recent winning streak.
Global Flight to Safety: The global flight to safety influences US Treasury bond yields, limiting the upside for the USD.
Technical Analysis – USD/JPY:
From a technical perspective, the move beyond the 143.00-143.10 confluence, including the 200-day Simple Moving Average (SMA) and the 23.6% Fibonacci retracement level, favors bullish traders. A move beyond the 144.00 resistance level could set the stage for additional gains. However, oscillators on the daily chart are yet to confirm a positive bias. Confirmation of a near-term bottom would require follow-through buying beyond the 144.00 mark.
Key Levels to Watch:
Resistance: The 144.00 level serves as a crucial resistance, and a break beyond it could lead to further gains towards the 38.2% Fibonacci retracement level at 144.65.
Support: Immediate support lies around 143.15-143.10 (200-day SMA), protecting the downside. A break below this level may expose the Asian session low around 142.85, followed by the 142.00 mark and the 141.75 horizontal zone.
Upcoming Events:
Traders are awaiting the release of the official US jobs data (Nonfarm Payrolls) on Friday for more clarity about the Fed’s future policy move. Thursday’s US economic docket, featuring the ADP report on private-sector employment and Initial Jobless Claims, will be monitored for short-term trading opportunities during the early North American session.
